When news of the sudden take-over of Skye Bank and its replacement with a bridge bank, Polaris Bank Limited, broke on Friday 21, September 2018, Nigerians reacted to the development with trepidation.
The announcement by the Central Bank of Nigeria (CBN) to the effect that Skye Bank ceased to be, and Polaris Bank was born, not only jolted the banking community but even investors as a result of precedence going by the losses that customers, staff and shareholders of defunct Savannah Bank and Societe Generale Bank of Nigeria incurred.
In the past years, Skye Bank had been troubled due to serial corporate governance lapses and liquidity challenges under the previous, according to CBN governor, Godwin Emefiele. Among the challenges were insider trading, non-performing loans, non-compliance with the remission of government’s funds to the Treasury Single Account (TSA) which attracted a stiff fine from the CBN, and a host of other infractions. It was the only bank known to have made a loss in 2015.
It came as no surprise, therefore, when the CBN in collaboration with other regulators – Nigeria Deposit Insurance Company (NDIC) and Asset Management Company of Nigeria (AMCON) – liquidated Skye Bank and established Polaris Bank in its stead. The new bank also automatically absorbed the assets, liabilities and obligations including customers and employees of the old bank.
Despite assurances of the safety of depositors’ funds and job security for employees of the former bank given by the regulators, a torrent of ill-informed media reports and commentaries about the regulatory action followed, thus heightening despair among stakeholders of the bank, especially customers of the bank.
A customer of the bank, Cynthia Eronmosele, said her initial fear was that her entire life savings in the old bank had gone down the ocean. Speaking with this reporter, she said that was the only account which she also uses for her business. She, however, got a relief when she got to her branch and found that her deposits were intact.
“I run a hair salon and this is the only account I’ve had and operated for the past seven years. When I heard the news of the takeover, I was afraid that all my money was gone. Now, I still have access to my funds and I have been operating my account without stress,” she said.
In line with regulatory requirements, newly- incorporated Polaris Bank, which acquired all assets and liabilities including staff and customers of defunct Skye Bank, was tasked with the responsibility of injecting new life into the entity and rebuilding customers’ confidence. It was also to stem looming job losses, meet customer obligations, entrench sound governance practices, curtail liquidity haemorrhage, improve performance and ensure a smooth sail moving forward.
Polaris Bank is also to continue the operations of the defunct bank and make it solvent in readiness for its acquisition by new equity investors by the set timeline of 2023.
While the mandate may appear daunting for Polaris Bank, to ensure its sound footing, AMCON immediately recapitalised it with N786 billion. By this action, Polaris Bank became a nationalised, government-owned entity, as opposed to publicly quoted status of its predecessor who’s equities were listed on the Nigerian Stock Exchange (NSE).
To assume this role effectively and achieve the set objectives, Polaris Bank Limited was also incorporated as a legal entity authorised to offer banking and financial services with its registration number on CAC Register as RC 1525101.
Investment analysts have commended the regulators for the prompt rescue action on troubled Skye Bank. Dave Adeleye, an investment banker with over 20 years’ experience, believes that the bridge bank is on a sure footing, and the measures already put in place by the regulators are right steps in the right direction.
“The former Skye Bank had shown signs of not being totally healthy, so it was no surprise when the CBN announced its liquidation and the establishment of Polaris Bank as the bridge bank. With the new structure coming in place, I am confident that it would be a smooth sail from here. I believe that the injection of funds into the new bank will ensure the safety of depositors’ funds and bring about a sense of confidence in the banking system,” he said.
The CBN had also announced the retention of the board and management team appointed by it in July 2016 to run the affairs of the new bank in the transition phase.
Led by the group managing director/CEO of the bank, Tokunbo Abiru, the management of Polaris Bank has pledged its commitment to deliver on its mandate to all stakeholders while appreciating its customers for their continued patronage, support and loyalty.
He added that the team would continue to consolidate on the success recorded from July 2016 when it successfully ensured the stability of the former bank in the wake of CBN’s earlier action that necessitated the appointment of the current board of directors chaired by highly-respected Alhaji Muhammad K. Ahmad and the management team under his leadership.
Abiru stated further that Polaris Bank is adequately capitalised and has the support of the regulators to succeed, adding that depositors can continue to transact business uninterrupted and are also encouraged to maintain their deposits and banking relationships with the bank without any apprehensions.
“You will recall that when the intervention was done in July 2016, there was a major run on the operation of Skye Bank, and part of what we have been able to do is to find a way to stabilise the bank.
“In the past few weeks, we have brought a sense of corporate governance to the operation of the bank, and we have also been able to recover loans owed by debtors substantially. As we speak, we have been able to recover over N100 billion; that is a significant achievement,” he stated.
CBN governor, Mr. Emefiele had attributed the regulatory action on Skye Bank to serial poor corporate governance issues in which N2.2 trillion worth of banking assets were lost coupled with the inability of shareholders to recapitalise the bank.
The regulators have expressed hope, however, that AMCON would be able to sell Polaris Bank to new equity investors before 2023, its sunset year; otherwise, its ownership will be transferred to CBN and Federal Ministry of Finance – both owners of AMCON.
And with the positive testimonials already manifesting just a few weeks after the September 21 regulatory action, confidence in the new bank is reportedly gaining ground faster than expected if past experiences were anything to go by. Of course, everyone is waiting on Tokunbo Abiru, who has been dubbed ‘the miracle-working banker’ to show his stuff again.
While the financial services sector and indeed the nation await the full evolution of the new Polaris Bank, the precedent set by the management and staff of the bank in winning depositors’ confidence speedily will go down in modern day history of the banking sector in Nigeria as a class act worth studying.
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